December 12, 2013
PCs launch another attack on Alberta energy sector: Wildrose
CALGARY, AB (December 12, 2013): The PC government’s unfair attack on the Alberta energy sector through changes to the Licensee Liability Rating program (LLR) is threatening jobs and economic growth in the province’s most important industry, the Wildrose Official Opposition said today.
Wildrose Leader Danielle Smith and Energy Critic Jason Hale were joined by several junior oil and gas producers today in Calgary to call for an immediate halt to recent changes to the Alberta Energy Regulator’s LLR program, which is imposing unfair financial burdens on small companies and forcing them into bankruptcy. Smith said the changes to LLR are an attack on Alberta’s economic prosperity not unlike the botched royalty review in 2007 that hiked royalties across the board and resulted in an economic slowdown. “By imposing these massive deposit fee increases on our junior producers, the PC government is once again attacking our energy sector and threatening the viability of our innovators and job creators,” Wildrose Leader Danielle Smith said. “Junior producers must be afforded the opportunity to succeed, grow and contribute to our economy. Instead, the PCs are attacking them with unfair penalties that will put them out of business.” The LLR is administered by the Alberta Energy Regulator and assigns a rating to oil and gas companies based on their deemed assets vs. liabilities. Companies with higher liabilities than assets must pay a security deposit for the difference. However, under the new AER, the amounts companies must pay in deposits have skyrocketed. As a result of the changes, it is estimated that 248 licensees are now on the hook for $297 million in security deposits, a dramatic increase from the 88 licensees that have posted $13 million to date. Hale says the increases are entirely unreasonable and a more workable solution must be found to keep these companies in business and the economy moving ahead. He cited one company’s example of having an $80,000 deposit jump to just under $5 million within a year – a sixty-fold increase. He also noted that companies only have 60 days to come up with the money before all of their wells are shut in regardless of production. “While the larger companies will be able to absorb these tremendous increases, they are devastating to our smaller producers,” Hale said. “By imposing these harsh deposits, the government is effectively shutting down productive companies who provide good jobs to Albertans, contribute to their communities and pay their taxes and royalties. It doesn’t make any sense.” David A. Corcoran, President of Blackdog Resources Ltd., a junior oil and gas company out of Calgary, says the LLR increases will mean the end for many producers and have a devastating financial trickledown effect on all the oilfield service companies and other firms who provide services to these producers. Corcoran is calling on new Energy Minister Diana McQueen to suspend the program until junior companies can adjust their business plans to comply with the new regulations. “This program is a death sentence for hundreds and hundreds of companies who spend a heck of a lot of money in Alberta to keep our economy going,” Corcoran said. “All of this economic benefit will be wiped out if the program in its current state is enforced.”